What is a Termination Letter?
When to use a Termination Letter:
- You're an employer who needs to terminate an employee because of layoffs, poor performance or some other reason.
- Your company is terminating an employee, and would like to have a record of the termination in the event of a lawsuit.
About Termination Letters
Learn about how to end an employee's tenure at your business
Understanding Termination Letters
A Termination Letter can be interpreted as a legal document by a court of law should your company be sued over the termination. For this reason, the letter of termination should not conflict with any Employment Contract or other contracts you signed with the employee. The contents should be limited to the contractual responsibilities of the terminated employee, the reason for the termination, and instructions for receiving termination benefits. Each state has separate termination requirements, and it is your responsibility to ensure the Termination Letter complies with your state's laws. Be sure to consult an attorney if you have any questions or concerns about terminating an employee or making an employee termination letter that complies with federal, state, and local laws.
If your company has a process to appeal terminations, you may include those details in the termination letter. Include the process for appeal and a person the terminated employee may contact for further information.
If your company does not have a process for appeal, it is not necessary to include this information.
California Unemployment Benefits
In California, an employer must provide the California Employment Development Department (EDD) Pamphlet DE 2320 regarding unemployment benefits, etc. upon termination.
Reasons for Termination
The listed reason(s) for termination can be challenged in a court of law should the employee choose to do so. If you have proof of poor performance, you should keep the proof in your employee records. Any complaints about tardiness or absence should be well documented if they are listed in the termination letter.
If you choose "Other" and enter your own reason, you may want to only list specific reasons if you have proof or other supporting documentation to back up those reasons. Try not to include emotion in listing your reason for termination. Consult with an attorney to review your reasons if you are not sure they can be legally supported.
Some states require separation compensation even for poor performance or breach of contract. You may want to review your state's requirements when writing a termination letter so you’ll know whether or not you should include separation benefits. Consult an attorney if you have any questions about your state’s requirements or concerns about meeting the separation compensation laws in your state.
It is important to disclose the effect of termination on long term benefits like health insurance and retirement plans. It is best to include someone to contact if the terminated employee has questions regarding benefits.
Signing and Delivering
Once you’ve completed your Termination Letter, review the final version to make sure it reflects and follows your company's policies exactly. Should the employee sue for wrongful termination (a lawsuit where the employee claims their termination was not lawful), the Termination Letter may be used as evidence against you.
It is best to deliver the Termination Letter in person or by certified mail restricted delivery. This way, the employee cannot argue that they did not receive a Termination Letter. You may want to document your delivery of the letter and any final payments to the employee, especially if you are unable to deliver them in person.
Termination Letter FAQs
How do I write a Termination Letter?
Letting go of an employee can be a relief, or in the case of a forced layoff, it can be very difficult. But being a professional means putting the notice of employment termination in writing. Let the employee know why the decision is being made and what both of your responsibilities are.
Here's what you may want to include in your Termination Letter:
Basic information: Note who is being terminated, the name of the company, and the name of the person who is handling the cessation of work. You'll also want to include the date, both of the letter of separation and the date the termination becomes effective, if those dates are different.
Reason for employee termination: As noted above, sometimes, a termination is out of your control. You may be an HR manager, forced to lay off an otherwise productive employee because the business is going through a rough patch. On the other hand, you might be firing an employee for verbal abuse, excessive tardiness, or poor performance. With a Termination Letter, your employee will get a better understanding of why they're being let go.
Lead up: If you are terminating an employee for reasons under their control, make sure to note whether they were warned, how many times, and whether those warnings were verbal, written, or both.
Company property: Whether it's a laptop you provided, a company car, or just a key card, chances are your employee has something that belongs to the company. Of course, in some cases of employee termination, certain property is given as a perk of employment. Make sure you note if you'll be asking for property back.
Vacation time and final paycheck: If your employee has accrued vacation time, chances are you're required to pay them for what they've accrued. But laws vary and, if you're dealing with a contractor or part-time employee, you may not have to pay out for vacation or sick leave.
What you will have to do is pay your employee what they're owed. Include what date they'll be paid through and how they'll receive their last paycheck: in person, by mail, or direct deposit. It's often smart to pay your employee then, so that when the Termination Letter is signed, employment is officially over.
Health insurance, 401K, and other benefits: If you've provided benefits like health insurance or retirement savings, you may want to make sure your employee knows how this will be handled, and that it is outlined in the Termination Letter. Provide them with information about continuing their health insurance and when it runs out. Let them know where their savings are. Your work relationship may be over, but your employee still has a future. Giving them this information up front will make their transition much easier.
Do employers have to give a reason for employment termination?
Before terminating an employee, it is important that you review your Employment Contract, Employee Handbook and any other HR policy to clearly understand your legal responsibilities as the employer—specifically whether or not you are obligated to terminate the employee with just cause, such as misconduct or poor performance.
Termination at will vs. termination for cause: Unless state law or your employment contract say otherwise, employment is generally at-will, meaning that employees can quit or be terminated with or without a specific reason or any advance notice/compensation. If you have questions about your reasons for terminating an employee, talk to an attorney.
Are Employers Required to Provide a Notice of Termination (Termination Letter)?
While many employment relationships are "at-will", there are some instances where a notice of termination may be required, including if the employee is covered by a union or collective bargaining agreement. If you are unsure about what requirements apply to your situation, ask a lawyer.
How can I avoid wrongful termination?
Even if you are terminating an at-will employee, there are still precautions to be taken to avoid wrongful termination, that is, firing someone for an illegal reason. In addition to laying out the terms of employment in an Employment Contract, you may want to also consider outlining your expectations in an Employee Handbook, documenting and enforcing your company's disciplinary policy, as well as maintaining proper records of disciplinary actions taken in the employee's HR file.
What other documents might be helpful for businesses or HR professionals?
If you're issuing a Termination Letter, you may find yourself needing other employment documents. Here are some to get you started:
If you have any questions about what's right for you and your business as it relates to termination law, we can connect you with a lawyer for quick answers or a review of your Letter of Termination.
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